ORLANDO, Fla. — Continuing to challenge drug stores as well as other retail channels at their own games, Walmart is stepping up its rollout of small-format stores.

The company this fiscal year plans to add 95 to 115 small-format units, which are less than 60,000 square feet and include its Neighborhood Market and Express stores. Walmart debuted 76 in the fiscal year ended January 31.

The retailer is excited about smaller outlets “because they compete really well against multiple channels,” Walmart U.S. president and chief executive officer Bill Simon said this month at the Raymond James Annual Institutional Investors Conference here.

He characterized Neighborhood Markets and Express stores as hybrids that compete against drug, grocery and dollar stores through pharmacies, fresh food and low prices.

Against drug stores and supermarkets, Walmart has a price advantage, while it beats dollar stores on assortment, Simon noted. “So we’ve seen our small formats compete very well against every one of these channels and deliver sales that we’re very proud of.”

Smaller stores have had prescription and over-the-counter drug same-store sales gains, Simon said, with pharmacy growth driven by the chain’s $4 generic drugs.

Some small outlets have a high percentage of site-to-store sales, whereby customers order products online for in-store pickup. A Neighborhood Market in a downtown Chicago skyscraper has generated up to 25% of its dollar volume through the company’s website.

“So much volume is done there that we had to rent more space from the landlord just
to be able to store the products that were shipped to the store through walmart.com,” Simon said.

Traffic at Neighborhood Markets, he noted, has been up 2% every quarter, with strength in every category. The company fully expects to have 500 Neighborhood Markets by late January 2015.

Express same-store sales gains have been in double digits, with pharmacy contributing significantly, Simon said. “If you can deliver … access to low-price prescriptions to markets that haven’t had access to them before, it’s very, very compelling from a traffic and a customer perspective.”

Smaller stores can be stocked with the same mix as a Supercenter, he emphasized, noting that the best-selling items at one of the large stores can be carried at an adjacent Neighborhood Market or Express store. “That’s a capability we have that others don’t.”